Why the TPP free trade pact does not make sense for Russia

Free trade agreements like Trans-Pacific Partnership (TPP) seem designed to marginalize or isolate Russia in the global economy. But there is another key reason why Russia will distance itself from TPP.

A protester holds a placard during a rally against the Trans-Pacific Partnership (TPP) in Tokyo. Photo: AP

Nobel Prize laureate Joseph Stiglitz noted in the New York Times earlier this year that the Office of the United States Trade Representative negotiates these agreements, supposedly on behalf of the American people. In practice, he concluded, the trade representative’s office is inescapably linked to large corporations and their interests.

Restricting intellectual property rights, which are frequently at the center of controversies over free trade, represents more than a war on pirated music and video downloads. In the case of TPP, for instance, Stiglitz suggests that new “anti-piracy” rules could help big pharmaceutical companies increase their monopoly profits on brand-name drugs. He worries that TPP will “trade away our health.”

According to Stiglitz, these anti-piracy laws would also limit competition from generic drug manufacturers, not allow real price competition in any of the 12 TPP signatory countries, and have the knock-on effect of putting pressure on producers of pharmaceuticals in other countries such as India. The health of billions of people may be affected by a TPP agreement.

This may be an over-the-top conclusion, but there’s an important truth in there. Pharmaceuticals are just one piece in a much bigger puzzle affecting citizens everywhere. Free trade deals are the basis of greater socio-economic inequalities as they ruthlessly transform the world into haves and have-nots.

This year the UK-based charity Oxfam reports that by 2016 the combined wealth of the richest 1 percent will be greater than that of the other 99 percent of the world’s population. A growing proportion of the 99 percent is now forced into conditions of what can only be called slavery.

It is as if the secret, inscrutable, and hurried free trade pacts among already wealthy countries is a necessity to ensure that such already outrageous levels of economic inequality will only increase further.

Free trade negotiations may be so secretive because they are polarizing and acrimonious. But under a winner-takes-all system, the principle of democratic centralism prevails: a defeated minority must completely submit to the will of the victorious majority.

The obsession with secrecy is troubling because it also raises the question: Whose good is being promoted? Generally free trade pacts do little for most people, suggests Paul Krugman, another Nobel-Prize winning U.S. economist. In a recentcolumn, he argues that the importance of trade policy is exaggerated. One reason is that “this reflects globaloney: talking about international trade sounds glamorous and forward-thinking, so everyone wants to make that the centerpiece of their remarks.”

Krugman continues: “Comparative advantage says ‘yay free trade,’ but also suggests that once trade is already fairly open, the gains from opening it further are small. But because economists want to keep shouting yay free trade, they look for reasons why those gains might be larger.”

He estimates that “hyperglobalization – the expansion of world trade to unprecedented levels since 1990” - has added 5 percent to world incomes. But a host of technological developments from containerization to the Internet accounts for much of this. A more accurate figure might be the European Commission’s estimate of the effect of the Single Market Act: It added just 1.8 percent to real incomes.

Such a modest level of growth is not what the richest 1 percent has been recording since the end of the bipolar world, nor is it a rate they aspire to in the future.

For Russia, free trade agreements like TPP seem designed to marginalize or isolate the country. These accords are sometimes given a political reading in which analogies with hostile military and politic blocs are made. It is a mistake to draw such comparisons.

TPP may indeed have incidental effects on the Russian economy – we can’t tell just yet. But it can be argued that the Shanghai Cooperation Organization bringing together Russia, China, and four Central Asian states into economic, political, and security collaboration has greater importance for Russia if free trade were put on the agenda (currently all but China are members of the Eurasian Economic Community). Russia’s support for deepening the BRICS structure also offers economic promise.

Russia has many reasons to avoid becoming stigmatized as seeking a return to state socialism or to be cast as an intransigent opponent of the global market economy. “Authoritarian,” “backward,” and “Oriental” are negative images of Russia propagated in much of the West. Russia’s leaders would be wise not to rant about Western-forged trade pacts.

Powerful economic actors in Russia itself might not allow this anyway. But Russia can capture much-needed moral high ground, and harness the economic wisdom of Nobel Prize economists, by distancing itself from the “globaloney” hype around TPP. It is the societies of the signatory states that need to battle against its ingrained injustices.

The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.